Published 5:30 am, Tuesday, April 29, 2008

BP posted a 63 percent surge in profit in the first three months of 2008, while Royal Dutch Shell saw a 25 percent hike. Shell, the second-largest oil company in the world behind Exxon Mobil Corp., and BP, the third-largest, both beat analyst expectations with results unveiled today.

BP said it earned $7.6 billion, or $2.09 per share, up from $4.4 billion, or $1.07 per share in the January-March period of 2007. Revenue rose to $89.2 billion from $81.2 billion.

"Certainly it's a generous result. I would be a little hard-pressed to think they could beat that by a lot in future quarters," John S. Herold analyst John Parry said of BP's results.

Shell said it earned $9.08 billion, or $1.47 per share, compared to $8.46 billion, or $1.36 per share in the first three months of 2007. Revenue was $114.3 billion, up from $106.7 billion a year ago.

Both companies, with U.S. operations based in Houston, saw their stock rise more than 4 percent on a day when crude futures fell. BP shares closed up $3.20 at $72.18 and Shell shares rose $3.47 to close at $80.19, both on the New York Stock Exchange.

Crude rose as high as $119.93 in intraday trading Monday when BP closed a North Sea pipeline after a strike at a Scotland refinery siphoned power supplies and violence in Nigeria affected production there.

The price dropped today, closing at $115.63 a barrel after BP reopened the pipeline.

While high oil prices bring in exploration and production profits, they squeeze refining margins — the difference between what oil companies pay for crude and the selling price of products made with it, such as gasoline. BP and Shell noted that their refining segments felt that drag, though companies with more refining exposure feel it more.

One of those is Houston-based ConocoPhillips, the nation's second-largest refiner, which last week reported a 17 percent increase in first-quarter profits, saying refining margins hindered the company's ability to benefit more from high oil and gas prices.

San Antonio-based Valero Energy, the nation's largest refiner, also felt the pinch. It reported today that its first-quarter profits fell 77 percent to $261 million, or 48 cents a share, from $1.14 billion, or $1.86 per share, in the same period last year. Valero shares closed down $1.44, or nearly 3 percent, at $51.49.

Exxon Mobil and Marathon Oil Corp. are slated to report results Thursday, followed by Chevron Corp on Friday.

BP's production was flat at 3.9 million barrels of oil per day equivalent.The company said production would have been up by more than 5 percent, but BP received fewer barrels of oil under contracts with oil-producing countries because of $100-plus oil.

Under such production-sharing contracts, companies are paid for their investments in barrels of crude. The higher the price, the fewer barrels they receive. That offset production increases from project start-ups last year.

BP's refining margins fell to $4.57 a barrel from $9.45 a barrel a year ago and reduced refining and marketing income by more than half, excluding a $600 million gain from a joint venture with Canada's Husky Energy to process heavy crude from Alberta's oil sands.

BP said refining results reflected downtime for major maintenance at its Carson, Calif., refinery. The company restored its Whiting, Ind. refinery to full capacity after downtime for repairs last year. Also during the quarter, BP restarted the last of four major units targeted for repairs at its Texas City plant since it shut down after Hurricane Rita hit in 2005.

"There's a huge drag effect associated with Texas City," BP Chief Financial Officer Byron Grote told analysts. "At Whiting, we were not at full capacity until the end of the end of the quarter, and we can't dismiss the turnaround at Carson. The first quarter of the year is not reflective at all of the potential we have in our refineries."

BP expects to restore Texas City to full capacity by mid-2008, he said. The company shut the plant down and initiated a $1 billion overhaul on the heels of the hurricane, about six months after 15 people died and scores more were injured when an octane-boosting unit exploded. That unit will not be restarted.

Shell produced 3.44 million barrels of oil equivalent per day in the quarter, up from 3.38 million barrels. The rise stemmed from a 9 percent hike in natural gas production, which offset a 6 percent fall in oil output, the company said.